Troubling times for the aftermarket industry

***Verdugo*** · 10-31-2008 10:40 AM

Don't believe that the industry is hurting? Here's a good read:

Market, economic conditions forcing aftermarket change - - Aftermarket Business - Wholesaler, retailer automotive parts

While it doesn't apply to the import aftermarket specifically, it still very much describes the problems that the entire industry as a whole are facing.

**akpak** · 10-31-2008 01:38 PM

It's a sad state when car shipments from overseas are idling on the ships at sea because there's no room on the ports because dealers aren't taking inventory of those cars because there's no room on their lots (or on their credit line) because people aren't buying them and driving them off.

A run-on problem warrants a run-on sentence.

**jmp2006** · 11-21-2008 08:08 AM

Well, unfortunately, if the dealers want to move their inventory then they need to get creative with their marketing and incentives. The buyers are, obviously, no longer just "low hanging fruit" so it's going to take some work on the dealer's and manufacturer's sides to get business moving again. It's just the way things are right now.

***Verdugo*** · 11-21-2008 08:45 AM

Originally Posted by jmp2006

Well, unfortunately, if the dealers want to move their inventory then they need to get creative with their marketing and incentives. The buyers are, obviously, no longer just "low hanging fruit" so it's going to take some work on the dealer's and manufacturer's sides to get business moving again. It's just the way things are right now.

As someone in the aftermarket industry, I'm curious to know what kind of marketing and incentives would you be attracted to, knowing that business still need to make money in the process? After all, if businesses just sell everything at cost, they won't survive that way either.

**efmd3** · 11-21-2008 08:56 AM

Originally Posted by Verdugo

As someone in the aftermarket industry, I'm curious to know what kind of marketing and incentives would you be attracted to, knowing that business still need to make money in the process? After all, if businesses just sell everything at cost, they won't survive that way either.

i think once the cost of living goes back down we'll get back to buying.

the best incentive ever is discount on future purchases.
EVER.
out of the crap I sell, If we reward repeat customers, we get more repeat customers

EDIT* BTW, premium gas here is $2.059/gal. and if my car were put together today, I'd go drive 500 miles TODAY to get her broken in.

2nd EDIT*
sell as much COBB as possible as they have fixed pricing which means greater profit margin.

**jmp2006** · 11-21-2008 10:24 AM

Originally Posted by Verdugo

After all, if businesses just sell everything at cost, they won't survive that way either.

No, you're absolutely right, selling EVERYTHING at cost is suicide but not thinking about some kind of monetary incentives is not the answer either. Because not selling ANYTHING is worse than selling something even if it's at a smaller profit margin.

A lot depends on what your current mark-up percentage is and whether or not there is a way for you to lower that in order to increase business. With the current downturn it may be an opportunity to grab larger market-share from competitors by being willing to "take a larger hit" in order to attract their customers, and, to take it further, may be able to keep them as repeat customers with the suggestions as posted above.

I am just generalizing, of course, but the idea is to leverage taking a loss on one side of the business while making it up on another until better times return. Many businesses tend to run a bit bloated in good times because there is generally very little thought given to this during times like that. On the other hand, when the business volume drops then it tends to be a bit of a "scramble-fest" to figure out how keep the same profit margin when if fact that may not be possible.

BTW - I don't mean to criticize the way you run your business, by any means, so I hope that I haven't offended you in any way.

***Verdugo*** · 11-21-2008 11:01 AM

Originally Posted by efmd3

i think once the cost of living goes back down we'll get back to buying.

the best incentive ever is discount on future purchases.
EVER.
out of the crap I sell, If we reward repeat customers, we get more repeat customers

EDIT* BTW, premium gas here is $2.059/gal. and if my car were put together today, I'd go drive 500 miles TODAY to get her broken in.

2nd EDIT*
sell as much COBB as possible as they have fixed pricing which means greater profit margin.

Very good ideas

You're right about Cobb too, although in certain cases, people aren't going to want to buy Cobb (not everyone needs a catted downpipe and not everyone is going to want an Accessport). We try though!

Originally Posted by jmp2006

No, you're absolutely right, selling EVERYTHING at cost is suicide but not thinking about some kind of monetary incentives is not the answer either. Because not selling ANYTHING is worse than selling something even if it's at a smaller profit margin.

A lot depends on what your current mark-up percentage is and whether or not there is a way for you to lower that in order to increase business. With the current downturn it may be an opportunity to grab larger market-share from competitors by being willing to "take a larger hit" in order to attract their customers, and, to take it further, may be able to keep them as repeat customers with the suggestions as posted above.

I am just generalizing, of course, but the idea is to leverage taking a loss on one side of the business while making it up on another until better times return. Many businesses tend to run a bit bloated in good times because there is generally very little thought given to this during times like that. On the other hand, when the business volume drops then it tends to be a bit of a "scramble-fest" to figure out how keep the same profit margin when if fact that may not be possible.

BTW - I don't mean to criticize the way you run your business, by any means, so I hope that I haven't offended you in any way.

No offense taken whatsoever, and in fact I very much welcome the suggestions, hence why I asked

The one thing that matters the most, but is the hardest thing to deal with, is profit margin. The aftermarket industry is notorious for having some of the lowest profit margins in all of retail, and if you're not a direct authorized dealer for certain brands, many times you can't ever compete at all. In a perfect world, all businesses would follow MAP and wouldn't grey market anything, but the sad truth is that this industry is quite the opposite. Take for example ACT...they have a MAP that just about no one follows, since most of the businesses out there aren't even authorized dealers for them, and thus buy their parts from an ACT distributor. The problem though, is that the distributor doesn't enforce MAP and ACT for the most part doesn't either. Thus, you find retailers making maybe $50 at most on a $700 clutch kit, and they're fine with it, so long as they make some money.

I agree with you though...marketing is key and having some sort of incentive is important to not only gain new customers, but keep them as repeat customers. A lot of times we've offered discounted labor rates for install as an incentive, but even that hasn't really done the trick either. That goes along the lines of taking a hit somewhere else to attract more customers, but even still the bottom line is important for most customers out there, at least over the past few months.

I've seen repeat customers that we've sold thousands of dollars to in the past come back to us and still ask us to price match another vendor, despite how happy they were with us and our customer service. Often times, they end up buying from the other vendor and are willing to put up with sub-par customer service in exchange for a lower price. However, at the same time, I've had a customer exchange dozens of e-mails with me until he finally decided on the set of wheels he wanted to purchase, and he came through in the end...so there are definitely still people out there who value customer service as a priority.